I've tried Werkzeug with Mako templates and I'm pleased that on current hardware, such a combination which is still very very much high-level and as remote from "bare metal" as I feel comfortable working with, can yield simple dynamic page performance of around 1000 pages per second per CPU. I'm sure this is more of a testament of how fast current hardware is than of Python's performance, which is, frankly, atrocious for today's standards. And this is even before we talk about its GIL which is killing its adoption for high-performance multithreaded server applications.
I'm very saddened to have found out that Psyco, the Python's JIT compiler and the only thing that made Python usable performance-wise outside simple scripting, is abandoned and, what's more, that it doesn't and probably never will work on 64-bit machines (mainly, amd64) - again, this means server workloads are affected the most.
But it will probably be a good project.
(to answer my title question - yes, Python is dieing, but only for the types of server projects I'm doing - no JIT and the GIL are killing it here)